Awareness of tax relief on donations low among higher & additional rate taxpayers, warns CAF
Melanie May | 16 January 2025 | News
Charities could be missing out on extra funds because of low awareness among higher and additional rate taxpayers of the tax relief they can receive on their donations, according to research.
Charities Aid Foundation found that two in five (39%) higher and additional rate taxpayers said they did not know tax relief was possible, while more than a fifth (22%) are aware but say they have never done it.
Higher and additional rate taxpayers who donated to charity in the previous year can claim for personal tax relief in their tax return. The difference between their tax rate and the basic rate of tax on the value of their donations can either be claimed as personal tax relief or donated to charity.
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For example, when a 40% rate taxpayer donates £100 to charity with a Gift Aid declaration, an extra £25 effectively goes to the charity, and they can bring down their tax bill by £25 or choose to donate that to charity as well. Individuals can also claim for relief for four years’ worth of previous donations through tax ‘overpayment relief’ with HMRC.
CAF’s research found that only 17% of higher and additional rate taxpayers say they always claim back money on their taxes for their donations. Of those who have previously claimed relief, the majority did so to reduce their tax liability (57%), with 35% doing so in order to donate the extra money to charity. 21% say they were recommended to by their accountant or financial adviser.
35% of people say they don’t claim because they don’t keep records of their donations, and 22% feel it’s too much work. Just over one in 10 (12%) had the misconception that it stops the charity from claiming money.
Self Assessment deadline
CAF has released the findings ahead of the Self Assessment tax return deadline on 31 January. More than 12 million people who are self-employed or earn over £100,000 are due to complete a Self Assessment tax return by this date, and HMRC forecasts that higher and additional rate tax relief on individuals’ Gift Aided donations is likely to be worth £690 million for the tax year to April 2024.
Mark Greer, Managing Director at the Charities Aid Foundation said:
“Charities miss out on millions every year from generous donors who don’t know about or forget to tick the Gift Aid box. As demand for charity services continues to increase, it’s vital that taxpayers make a Gift Aid declaration to charities they support.
“Incentives for charitable giving are crucial to encourage and increase support for charities from those who are in a financial position to donate. Talking about tax and charitable giving can be a bit uncomfortable for some, but we need to increase awareness and understanding about these valuable incentives. For those who are not aware, consider how extra funds could boost the income of the charities you care about in the future.”
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About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.